Here are some of the trades I took today that I thought were worth mentioning because of what they taught me. I don’t pick these based on the P/L but on the insight from the plan, execution, or mistakes that I feel can help me develop.
Was stalking city for quite some time for a break out from its consolidation pattern following a strong move in the morning. This was based on my idea for the day that we would see a mean revision bounce across the markets. I managed to enter this move right before it began with a pass order at filled at 37.35 at 10:26. I noticed the area was refreshing and that sell volume was drying up. I punched out once the buying pressure abated and the stock began to move against me at 10:34.
I was watching this again based on my idea from yesterday that a bounce in the broad markets would see this high beta name bounce as well. I noticed it flagging out while still wicking down quite substantially. I placed an order in for 49.63 with a willingness to see it trade below 49.57 before stopping out. My reasoning for this was that I knew the stock traded in a wider range and the low 60s had seen steady buying every time the area was reached. It was important for me to get a price where the loss would be manageable if the area of support was broken. I was filled at 11:11 when the stock wicked down and managed to hold it for the duration of the up move. I punched out at 11:22 and then made the mistake of not paying attention to the stock as I could have easily preformed the trade again minutes later.
This trade was bad on so many levels. It was late in the day, I was playing for a market bounce that never materialized. I was trying to catch a knife based on bias. Because we so love to compound our errors I also bade the mistake of not respecting my stop, taking a 12 cent loss when I had intended to risk only 5. I didn’t need to take this trade, the signals weren’t there but I wanted to turn a good day into a great day, became overeager and tried to force a trade. This is a combination of mistakes I cannot repeat.
After work, I had a talk with Duane about things which I could do to improve my trading results. One of the things which he said to me was that I spent too much time tracking too many symbols and so was likely to miss the things on the level 2 that could give me my edge. Reviewing these trades his point strikes home much more as my best trades came from patiently executing ideas based on information gained from the level 2. In addition, my losses primarily stem from trades that are rushed, where I do not take time to review the information and watch the stock trade. I recorded tape for today but forgot my USB key, I will post some this weekend.
Addition: Trade video
Let me just start by saying: “I know, the video is long”, so I have listed the times of the entry and exit in the description.
FCX – In the video you can see the stock initially trading in a range from the high 49.60s to the low 49.70s. Buyers are holding the stock within this range, creating the flag pattern you can see on the 3 minute chart. I didn’t want to bid here because larger moves are often started with some selling, driving the price lower before it gets aggressively bid up, effectively breaking out. This is the play I was looking for. I wait to see the stock break below its support range and stabilize before setting my bid at 49.63 at 2:48 in the video and getting filled shortly after. The stock then does what I want to see from the trade, trading back into its initial support range, effectively giving me a cushion to allow me to wait for the larger move safely, before breaking out. At 5:40 in the video I begin thinking about an exit because 50 was the first target for the trade. I noticed 50 was refreshing a lot on the offer and when the buyers did break the level the buying became much more muted. As sellers presented themselves and 50 first refreshed on the bid then was unable to hold I exited. The buyers did make one final push following my exit, causing me to miss some upside, but the stock shortly traded below the exit price.